AXIS BANK vs M/S SHREE MANICKKAM INFRASTRUCTURE PVT LTD on 30 August 2022

FINAL ORDER

1. This application is filed by the applicant bank under Section 19(1) of Recovery of Debts and Bankruptcy Act, 1993 against the defendants for recovery of a sum of Rs.3,41,30,484.14p with further interest at the rate of 12.80% per annum with monthly rests from 1.10.2016 till the date of realization in full along with costs of this application and for sale of schedule properties.

2. The subject matter of the case is the Cash Credit facility availed by the defendants from the applicant bank.

3. It is the case of the applicant that the 1st defendant engaged in the business of engaging in construction of residential / commercial buildings and interior works for its customers approached the applicant for grant of credit facilities for the purpose of their business and considering the said request the applicant vide its sanction dated 28.10.2013 sanctioned Working Capital facility of Rs.3,75,00,000/- to the 1st defendant. It is stated that the 1st defendant after availing the credit facility executed various documents in favour of the applicant bank on 29.10.2013 viz., Demand Promissory Note for Rs.3,75,00,000/-, Promissory Note delivery cum waiver letter, Letter of arrangement for cash credit facility, counter indemnity for guarantee limit evidencing the granting of facility of Rs.75,00,000/- and deed of hypothecation of current assets, stocks, book debts, more fully described in Schedule „A‟ to the OA. It is stated that the defendants 2 and 3 executed guarantee agreement thereby guaranteeing due repayment of the credit facility availed by the 1st defendant.

4. It is also the case of the applicant that the 2nd defendant deposited the title deeds of the property more fully described in Schedule „B‟ to the OA with the applicant bank on 29.10.2013 with an intention to create equitable mortgage over the same and confirmed the same by executing Memorandum of Deposit of Title deeds dated 29.10.2013 registered as Doc. No.3137 of 2013, SRO, Mylapore.

5. It is the further case of the applicant that at the request of the 1st defendant the applicant renewed the credit facility vide its sanction dated 24.12.2014, 27.6.2015, 07.01.2017 and 29.6.2018. It is stated that the 1st defendant duly accepted the terms and conditions of renewal and executed balance confirmation letter dated 28.2.2015 and acknowledgement of debt dated 15.4.2015, 28.9.2016, 11.6.2018.

6. It is the case of the applicant that the defendants having availed the credit facility defaulted in repayments and failed to regularize the loan account despite repeated demands and also failed to comply with the terms and conditions of sanction and did not take any steps to regularize the loan account, however, the defendants. It is also the case of the applicant that as the defendants did not come forward to clear the dues, the applicant issued a recall notice on 12.09.2019 but there was no response from the defendants.

7. It is the case of the applicant that after availing the loan, the defendants were irregular in remitting the loan amount. The efforts of the applicant bank to make the defendants settle the loan did not yield any result, and hence the applicant approached this Tribunal seeking issuance of a Recovery Certificate allowing recovery of the amount due in the account.

8. Summons were taken out to the defendants and the summons sent to the defendants 1 and 2 returned with endorsement “Door Locked” and the summons to the 3rd defendant was served. The defendants were served with notice by substituted service by causing paper publication. As there was no representation on behalf of the defendants on 07.10.2021 the defendants were called absent and set ex-parte on that day. Applicant Bank filed Proof Affidavit along with 32 documents, which were marked as Ex. A-1 to A-32 on 20.06.2022, however Exhibit A-29 and A-30 were marked subject to proof and relevancy. The Ld. Counsel for Applicant Bank made his submissions on 28.07.2022 and thereafter the matter stood till this date for passing final orders.

9. The following issues arise for consideration in the matter: - (a) Whether the applicant had succeeded in proving the liability of the defendants?

(b) What order as to cost of the proceedings need be passed?

These issues are considered together.

10. Heard the Ld. Counsel for the applicant, perused the OA averments and the records placed before the Tribunal.

11. The evidence of the applicant is led by AW1 who produced the documents Exhibit A-1 to A-32 along with the proof affidavit. Exhibit A-1 is the power of attorney authorizing the deponent to file the OA. Exhibit A-2 is the Sanction letter dated 28.10.2013 issued by the applicant. Exhibit A-3 is the Board Resolution of the 1st defendant dated 29.10.2013 authorising the Directors to execute the loan documents. Exhibit A-4 is the Demand Promissory Note dated 29.10.2013 for

Rs.3,75,00,000/- executed by the 1st defendant. Exhibit A-5 is the Promissory Note Delivery cum waiver letter dated 29.10.2013 executed by the 1st defendant. Exhibit A-6 is the letter of arrangement for cash credit facility dated 29.10.2013 executed by the 1st defendant. Exhibit A-7 is the counter indemnity for guarantee limit evidencing the granting of facility of Rs.75,00,000/- executed by the 1st defendant dated 29.10.2013. Exhibit A-8 is the deed of hypothecation dated 29.10.2013 creating security over Schedule „A‟ property executed by the 1st defendant. Exhibit A-9 is the deed of personal guarantee dated 29.10.2013 executed by the 2nd defendant. Exhibit A-10 is the deed of personal guarantee dated 29.10.2013 executed by the 3rd defendant. Exhibit A-11 is the letter of undertaking dated 29.10.2013 executed by the defendants to repay the loan amount. Exhibit A-12 is the Memorandum of Agreement dated 29.10.2013 evidencing deposit of title deeds executed by 2nd defendant over Schedule „B‟ property registered as Doc. No.3137 of 2013. Exhibit A-13 is the declaration cum confirmation deed dated 30.10.2013 executed by the 2nd defendant. Exhibit A-14 to A-16 are the record of mortgage by deposit of title deeds executed by the 2nd defendant dated 30.10.2013 depositing the sale deed dated 01.09.2002 registered as Doc. No.2658 of 2002 and Memorandum of Understanding dated 18.4.2003 in respect of Schedule „B‟ property. Exhibit A-17 is the sanction letter of the applicant bank dated 24.12.2014. Exhibit A-18 is the sanction letter of the applicant bank dated 27.06.2015. Exhibit A-19 is the balance confirmation dated 28.2.2015 executed by the defendants. Exhibit A-20 is the acknowledgement of debt dated 15.4.2015 executed by the defendants. Exhibit A-21 is the sanction letter of the applicant bank dated 19.12.2015. Exhibit A-22 is the sanction letter of the applicant dated 12.8.2016. Exhibit A-23 is the amendment cum link agreement dated 28.9.2016 executed by the defendants. Exhibit A-24 is the acknowledgement of debt dated 28.9.2016 executed by the defendants. Exhibit A-25 is the sanction letter of the applicant bank dated 7.1.2017. Exhibit A-26 is the sanction letter of the applicant bank dated 7.9.2017. Exhibit A-27 is the sanction letter of the applicant bank dated 29.6.2018. Exhibit A-28 is the acknowledgement of debt dated 11.6.2018 executed by the defendant. Exhibit A-29 is the certificate of registration of charges created with Registrar of Companies. Exhibit A-30 is the recall notice dated 12.9.2019 issued by the applicant to the defendants with postal receipt and acknowledgement. Exhibit A- 31 is the statement of accounts in respect of the loan account. Exhibit A-32 is the interest rate circulars / certificate maintained by the applicant bank.

12. Exhibit A-1 evidences that the deponent of the proof affidavit is empowered to institute and defend the claim on behalf of the applicant bank. Exhibit A-2 to A-7 evidences that at the request of the 1st defendant the applicant vide its sanction dated 28.10.2013 sanctioned cash credit limit of Rs.3,75,00,000/- to the 1st defendant and the 1st defendant executed necessary loan documents. Exhibit A- 8 evidences that the 1st defendant had hypothecated the movables more fully described in Schedule „A‟ to the OA in favour of the applicant by executing deed of hypothecation dated 29.10.2013. Exhibit A-9 and A-10 evidences that the defendants 2 and 3 executed guarantee agreement on 29.10.2013 thereby personally guaranteeing due repayment of the credit facility availed by the 1st defendant. Exhibit A-11 evidences that the defendants had undertaken to repay the loan by executing undertaking letter dated 29.10.2013. Exhibit A-13 to A-16 evidences that the property more fully described in Schedule „B‟ to the OA is owned by the 2nd defendant and he has created equitable mortgage over the same in favour of the applicant bank by way of deposit of title deeds on 29.10.2013 and confirmed the same on 30.10.2013. It also evidences that the said mortgage has been recorded, Exhibit A-17 and A-18 evidences that at the request of the 1st defendant for renewal of limit, the applicant by its sanction letter dated 24.12.2014 and 27.06.2015 renewed the cash credit facility for further period. Exhibit A-19 and A-20 evidences that the defendants had confirmed the balance on 28.02.2015 and had also acknowledged the debt on 15.04.2015. Exhibit A-21 and A-22 evidences that at the request of the 1st defendant the cash credit facility was renewed for further period vide sanction letter of the applicant dated 19.12.2015 and 12.08.2016 subject to terms and conditions. Exhibit A-23 evidences that the defendants on 28.9.2016 had executed amendment cum link agreement. Exhibit A-24 evidences that the defendants had acknowledged the debt on 28.9.2016. Exhibit A-25 to A-27 evidences that at the request of the 1st defendant the Cash Credit Facility was renewed for further period on 7.1.2017, 07.09.2017 and 29.06.2018 respectively. Exhibit A-28 evidences that the defendants had acknowledged the debt on 11.6.2018. Exhibit A-29 evidences that the charges created over the properties by the 1st defendant is entered in the office of Registrar of Companies. Exhibit A-30 evidences that the defendants defaulted in repayment and failed to regularize the loan account despite repeated

demands and requests and hence the applicant had issued the recall notice on 12.9.2019 calling upon the defendants to clear the outstanding dues. Exhibit A- 31, the statement of accounts in respect of both the loan accounts produced and certified under the Banker‟s Book Evidence Act, clearly indicates that the amount claimed by the applicant is due from the defendant. It is clear from the statement of accounts that penal interest is not capitalized. Exhibit A-32 evidences the interest has been charged by the applicant as per the interest rate circulars of the applicant bank.

13. The proof affidavit of the applicant bank remained unchallenged and unrebutted. Therefore, on careful consideration of proof affidavit along with Exhibits filed on behalf of the applicant bank, besides the material placed before the Tribunal, the Tribunal is satisfied that the applicant bank has successfully proved the OA claim against the defendants. Point is answered accordingly.

14. In view of the fact that the loan availed by the defendants being business loan and the interest rates have come down the Tribunal is of the view that pendent lite interest can be awarded at reduced rate and also proceeds to reject the prayer for grant of penal interest.

15. In view of the afore mentioned discussions, the only conclusion this Tribunal can draw is that the applicant had clearly proved the disbursement of the loan, which the applicant is entitled to realize. Hence, OA is disposed off in the following manner: - (a) OA No.943 of 2019 stands allowed.

(b) Applicant is permitted to realize a sum of Rs.3,41,30,484.14p with further interest at the rate of 12% per annum (simple) from the date of filing of the OA till date of realization from the defendants jointly and severally, after deducting all the amounts received by them during the pendency of OA, and also by selling the schedule mentioned properties and other assets of the defendants.

(c) If the sale proceeds are not found sufficient to cover the amount due and payable to the Applicant Bank, the defendants 2 and 3 are personally liable for all such amounts due.

(d) Applicant is permitted to realize cost of the proceedings and shall file cost memo within 7 days from the date of the order.

(e) The Recovery Certificate shall be drawn up and issued to the Recovery Officer in terms of this final order.

16. Communicate a copy of the order to the parties concerned in terms of Section 19(21)(i) of the RDB Act, read with Rule 16 of DRT (Procedure) Rules, 1993. (Dictated to PS, transcribed by him, corrected, signed and pronounced by me in Open Court on this the 30th day of August, 2022)

Sd/- (T. RAJESH) PRESIDING OFFICER DRT-II, CHENNAI